LandedPulseWhat is the difference between the nominal and the effective rate?
The nominal rate is the percentage printed in the tariff schedule against a heading. The effective rate is what the shipment actually costs as a proportion of goods value once the duty base, surcharges and taxes are applied — it is almost always higher.
Two things drive the gap. First, in most jurisdictions duty is charged on a customs value that includes freight and insurance, not on the invoice price alone (the United States is an exception: it taxes the transaction value). Second, surcharges under programmes such as Section 301 stack on top of the base rate without appearing in the schedule entry.
Value-added tax then compounds the difference, because it is levied over a base that already contains the duty. A jurisdiction with a 2% nominal duty and 20% VAT does not cost 22% of goods value — it costs more, because the VAT applies to the freight and duty as well.
Quoting a buyer from the nominal rate is the most common way importers lose margin they thought they had. The effective rate is the only figure worth putting in a quotation.
Last reviewed . General guidance on import duty mechanics, not customs or tax advice for a specific shipment.